Completely Unwoven: Business, Economics, and Tax Policy 4.0

[LynahFan]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

Would the following work?

Pass an amendment (so no going back) that if the national debt (not deficit) is positive, the budget cannot exceed the prior year's budget.

We start out with the current deficits of $1T a year and a debt of $18T. Obviously, the budget freezes. The years go on, inflation and revenue collection continue to increase and the deficit decreases towards zero (with the debt still building). Eventually you hit a budget surplus (with the debt at I dunno, say $30T). There's still a debt so the budget is still frozen. But surpluses now begin to gallop, and the debt is repaid relatively quickly (particularly as no new debt means decreasing debt service). In a decade or so the debt vanishes utterly, and with a national surplus the prohibition of budget increases flips back off. Future debt is controlled as the budget freeze kicks in whenever the debt returns (not quite the same thing as a balanced budget amendment, since we're free to run up a substantial surplus though, given human nature, Congress would never behave that way).

There is pain along the way, but now people know exactly what low tax rates are costing us -- they are forced to cut services rather than roll up more debt. All of a sudden Eisenhower era progressive tax rates sound like a very good idea.

Couldn't resist running your numbers. For end of 2014 from this site:

GDP = 17.2T
Debt = 17.8T
Revenue = 3.02T
Spending = 3.50T
Effective Tax Rate = 3.02/17.2 = 17.6%

If we assume the Republicans hold serve and keep the total tax rate fixed at 17.6%, spending stays capped at 3.5T, and GDP growth is 2%, then it would take until 2044 to reach 0 debt. Debt peaks out at just 19.3T in 2022.

If the Democrats can make some headway and get the net tax rate increased to 20%, that would essentially erase the deficit "instantaneously" 2016, and that would bring "payoff day" forward to 2037.

I think you're missing a key point, though - in the year after payoff day, what's to stop Congress from tripling spending and then keeping it capped at *that* level for the next 50 years...?

[joecct]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

Would the following work?

Pass an amendment (so no going back) that if the national debt (not deficit) is positive, the budget cannot exceed the prior year's budget.

We start out with the current deficits of $1T a year and a debt of $18T. Obviously, the budget freezes. The years go on, inflation and revenue collection continue to increase and the deficit decreases towards zero (with the debt still building). Eventually you hit a budget surplus (with the debt at I dunno, say $30T). There's still a debt so the budget is still frozen. But surpluses now begin to gallop, and the debt is repaid relatively quickly (particularly as no new debt means decreasing debt service). In a decade or so the debt vanishes utterly, and with a national surplus the prohibition of budget increases flips back off. Future debt is controlled as the budget freeze kicks in whenever the debt returns (not quite the same thing as a balanced budget amendment, since we're free to run up a substantial surplus though, given human nature, Congress would never behave that way).

There is pain along the way, but now people know exactly what low tax rates are costing us -- they are forced to cut services rather than roll up more debt. All of a sudden Eisenhower era progressive tax rates sound like a very good idea.

There is good debt (purchase of long term assets) and bad debt (balancing cash in to equal cash out). We need to separate the two and get rid of bad debt in its entirety except in cases of national emergency and then that must be funded by specific debt instruments (ie War Bonds).

[Kepler]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

Couldn't resist running your numbers. For end of 2014 from this site:

GDP = 17.2T
Debt = 17.8T
Revenue = 3.02T
Spending = 3.50T
Effective Tax Rate = 3.02/17.2 = 17.6%

If we assume the Republicans hold serve and keep the total tax rate fixed at 17.6%, spending stays capped at 3.5T, and GDP growth is 2%, then it would take until 2044 to reach 0 debt. Debt peaks out at just 19.3T in 2022.

If the Democrats can make some headway and get the net tax rate increased to 20%, that would essentially erase the deficit "instantaneously" 2016, and that would bring "payoff day" forward to 2037.

I think you're missing a key point, though - in the year after payoff day, what's to stop Congress from tripling spending and then keeping it capped at *that* level for the next 50 years...?

Thank you for running the numbers.

25 years under that regime would prove two things:

1. Holding the budget flat isn't the end of the world.
2. Restoring real progressive tax rates at pre-Kennedy levels isn't the end of the world.

Right now the Democrats terrify the public with Myth 1 and the Republicans terrify the public with Myth 2.

Also, living under that regime for 25 years would change Americans' general expectation in regard to budget and revenue, which would be a good thing to do. The ultimate "offering free stuff" has been the GOP's refusal to pay for what we buy. This would drive a stake into the heart of that forever. Bad* news for billionaires; good news for literally everybody else.

(* Maybe not even bad news for them. US growth depends on the middle class that supply side policies have destroyed. Restoring the middle class would give companies millions more customers rich enough to buy their crap. And who owns those companies?)

[Kepler]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

Interesting.

There is a massive misconception about where the Bernanke Fed’s stimulus landed. Although the Bernanke Fed has disbursed $2.284 trillion in new money (the monetary base) since August 1, 2008, one month before the 2008 financial crisis, 81.5 percent now sits idle as excess reserves in private banks.

[St. Clown]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

Interesting.

Why would banks lend money for extremely low interest rates when the Federal Reserve has been continually discussing the possibility of raising rates, and at the same time the Federal Government is increasing the requirement of how much cash a bank needs to have on hand in order to weather another financial crisis? Two government entities that are supposed to work towards the same end goal have put in place incentives that completely undermine one another.

[unofan]

Why would banks lend money for extremely low interest rates when the Federal Reserve has been continually discussing the possibility of raising rates, and at the same time the Federal Government is increasing the requirement of how much cash a bank needs to have on hand in order to weather another financial crisis? Two government entities that are supposed to work towards the same end goal have put in place incentives that completely undermine one another.

Nothing has prevented the banks from lending at higher rates currently, so long as someone is willing to pay it.

Plus 5% in interest is better than the 0% they're getting from holding that cash on the sidelines.

[FreshFish]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

When I hear normally-intelligent people blithely talk about taking money away from billioinaires, I wonder if it is merely the case that they don't understand billionaires and what drives them? if they did, they'd realize that there is a much better solution to the problem they are trying to address: rather than treat billionaires as your enemy, recruit them as your ally.


What do those people think billionaires do with their money???

Seriously, it is not Scrooge McDuck diving around in a swimming pool full of cash!!





Many billionaires put their money to constructive use: the cars we drive, the computers we use, the food we eat, the houses we inhabit, are only possible because of billionaires. That's because they don't care about money, per se, what they care about is keeping score. A billionaire in business is no different than Michael Jordan in basketball: driven to be the best that ever was. For Jordan, they kept score on a court, for a billionaire, s/he keeps score differently. Why would Carl Icahn continue to shake up moribund companies, with his wealth and age? It's not about the money, it's about the competitive fire to excel and to continue getting better.

Edison, Westinghouse, Carnegie, Rockefeller, Walton, Carrier, Otis, the Wright Brothers, Jobs, Ford, they took an existing technology and used it in a new way that either created a new technology, or they found a way to take a luxury item and make it widely accessible and economical for everyone.

Why would anyone in their right mind (if they thought about it) want to stifle that kind of innovation that benefits so many so widely???





As St. Clown said earlier, the problem is not billionaires, it is perverse incentives. Right now, there are rules against "self-dealing" between the person who establishes a charitable foundation and the investment of the foundation's endowment. Suppose we tweak those rules instead: let these billionaires run their business empires as foundations. There are already sufficient statutory guidelines in ploace to ensure that foundations¹ makes appropriate statutory disbursements to qualified beneficiaries.

Bernie Sanders in theory ought to love this idea, it is non-governmental socialism, except it would be voluntary, not mandatory. If these guys' egos are driven to amass as much wealth in a game to them is akin to playing Life and wanting to retire to Millionaire Acres with the most money, give them a chance to keep score in a different playing field. Bloomberg and Gates would go for it in a flash, they already have massive foundations and are looking to put the funds to use. Just tweak the self-dealing rules slightly to allow them hands'-on management of the foundation assets: the better the foundation does, the more money it is required to disburse toward the social welfare.








¹ ....with the possible exception of The Clinton Foundation, perhaps....

[LynahFan]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

As St. Clown said earlier, the problem is not billionaires, it is perverse incentives. Right now, there are rules against "self-dealing" between the person who establishes a charitable foundation and the investment of the foundation's endowment. Suppose we tweak those rules instead: let these billionaires run their business empires as foundations. There are already sufficient statutory guidelines in ploace to ensure that foundations¹ makes appropriate statutory disbursements to qualified beneficiaries.

What the heck are you talking about? This makes absolutely no sense. The vast majority of billionaires do not own private companies - they are majority stakeholders in one or more major corporations. Those corporations are only as successful as they are because they were able to raise capital through issuance of publicly traded stock. If you tried to run Microsoft as as a "foundation" with all proceeds going to charity, who exactly would purchase such a stock - stock with absolutely no prospect of dividends? We're not talking about the Green Bay Packers, here...

Bill and Melinda Gates do run an amazing foundation (a friend of mine works there), but there's a reason they set that up as a separate entity rather than trying to turn Microsoft itself into a charity. Would you buy stock in the Gates Foundation? "Sorry Mr. Fish - I know you thought you were going to get a dividend, but we gave the money away to eradicate Malaria instead. Our bad."

But, just to humor you: what *exactly* would have to change in the tax law to allow a corporation to give away more to charity than it currently does?

[jerphisch]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

When I hear normally-intelligent people blithely talk about taking money away from billioinaires, I wonder if it is merely the case that they don't understand billionaires and what drives them?

It's not about the money, it's about the competitive fire to excel and to continue getting better.

So, you're saying we should increase taxes on them even more than those normally intelligent blithely speaking people think because they don't care about money, amiright? All they need is just enough to fuel that competitive fire?

[joecct]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

Pfizer and Allergan inversion together.

https://www.washingtonpost.com/news/...mepage%2Fstory

[dxmnkd316]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

Pfizer and Allergan inversion together.

https://www.washingtonpost.com/news/...mepage%2Fstory

Sickening...

[Jimjamesak]

Sickening...

It is one interesting aspect of American Exceptionalism, global taxation as opposed to just territorial taxation.

[5mn_Major]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

Sickening...

Nice choice of words. Mergers of huge companies are often bad for the consumer. And probably just so here.

On the other hand, I think many really dislike pharmas due to them 'pushing' some drugs. I don't go nearly that far. I see a drug company with drugs like Prozac as being similar to a defense attorney. Sometimes Prozac is the correct prescription and sometimes not. If it can be the right drug, it needs an advocate otherwise it will never be prescribed. The key player here is the doctor. The doctor needs to make the right decision as to whether to prescribe. So for better or worse, the doctor is responsible for diagnosis and the large responsibility that goes with that. Beyond that, detractors seem to miss the fact that pharma products save countless lives every year. Many of these drugs really are modern miracles for which pharmas get little credit from detractors.

[Kepler]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

The joys of capitalism. Also, Nestle makes seafood?

[St. Clown]

Re: Completely Unwoven: Business, Economics, and Tax Policy 4.0

The joys of capitalism. Also, Nestle makes seafood?

Nestle is the European version of Kraft, only bigger. Walking through the streets of Europe in 2000, every grocery store had a product featured that's branded "Nes[fill in the blank]".